science

Pharmacoeconomics

Pharmacoeconomics is a science topic covered in the lgStudy science library. This page brings together a partial reference excerpt, illustrations, worked examples, real-world applications and a short study plan, so you can understand Pharmacoeconomics rather than just read about it. In short: Pharmacoeconomics refers to the scientific discipline that compares the value of one pharmaceutical drug or drug therapy to another. It is a sub-discipline of health economics.

Key takeaways

Pharmacoeconomics belongs to science; place it in that map before memorising details.
Learn the definition first, then one example that makes the definition concrete.
Connect Pharmacoeconomics to a quantity you can measure, compute or draw — that is where exam questions come from.
Reproduce the core statement of Pharmacoeconomics from memory before moving on to harder problems.

Reference excerpt

Pharmacoeconomics refers to the scientific discipline that compares the value of one pharmaceutical drug or drug therapy to another. It is a sub-discipline of health economics. A pharmacoeconomic study evaluates the cost (expressed in monetary terms) and effects (expressed in terms of monetary value, efficacy or enhanced quality of life) of a pharmaceutical product. Pharmacoeconomic studies serve to guide optimal healthcare resource allocation, in a standardized and scientifically grounded manner.

Economic evaluation Pharmacoeconomics centers on the economic evaluation of pharmaceuticals, and can use cost-minimization analysis, cost-benefit analysis, cost-effectiveness analysis or cost-utility analysis. Quality-adjusted life years have become the dominant outcome of interest in pharmacoeconomic evaluations, and many studies employ a cost-per-QALY analysis. Economic evaluations are carried out alongside randomized controlled trials and using methods of decision-analytic modeling. Pharmacoeconomics is a useful method of economic evaluation of various treatment options. As more expensive drugs are being developed and licensed it has become imperative especially in context of developing countries where resources are scarce to apply the principles of pharmacoeconomics for various drugs and treatment options so that maximum improvement in quality of life can be achieved in minimum cost.

In policy In 1993, Australia became the first nation to use pharmacoeconomic analysis as part of the process for deciding whether new drugs should be subsidized by the Federal Government. The Pharmaceutical Benefits Advisory Committee (PBAC) advises Federal Government ministers on whether new drugs should be placed on a list for of drugs that consumers can then purchase from pharmacies at a subsidized price. Since 1993, this approach to evaluating costs and benefits is used in Canada, Finland, New Zealand, Norway, Sweden, and the UK.

Impact of pharmaceutical innovations

In the past 30 years, major pharmaceutical innovations have improved condition-related outcomes for six serious medical conditions: ischemic heart disease, lung cancer, breast cancer, human immunodeficiency virus (HIV) infection, type 2 diabetes mellitus, and rheumatoid arthritis (RA). Spending on new pharmaceuticals and R&D, although expensive, is considered to bring net benefits, as it decreases overall health care costs. A study of 30 countries estimated that 73% of the increase in life expectancy in recent decades is due to new pharmaceuticals alone. Another study found that new drugs have reduced hospital usage by 25% per decade by replacing more expensive forms of care like surgery. It has been estimated that the cost per additional life-year gained thanks to pharmaceutical innovation was US$2,730, compared with US$61,000 for dialysis, a commonly used benchmark.

Worked examples

Example 1 — a first encounter with Pharmacoeconomics

Start with the simplest possible case. Write down what Pharmacoeconomics claims or describes in one sentence, then invent the smallest concrete situation in which that sentence is true. In science, the smallest case is usually a single object, a single equation or a single measurement. Check that every symbol or term in your sentence has a meaning in that case.

Example 2 — changing one variable

Take the situation from Example 1 and change exactly one quantity: double it, halve it, or set it to zero. Predict what should happen to Pharmacoeconomics before you calculate. Comparing your prediction with the result is the fastest way to find out whether you understand the idea or only the words.

Example 3 — an exam-style question

Typical questions about Pharmacoeconomics ask you to (a) state it precisely, (b) apply it to given data, and (c) explain a limitation. Practise writing all three answers in under five minutes; the third part is what separates a full-mark answer from an average one.

Applications of Pharmacoeconomics

In research: Pharmacoeconomics appears in science research whenever the underlying quantities have to be modelled precisely. Papers usually cite it as a starting assumption and then explore where it breaks down.
In technology and industry: Engineering practice reuses Pharmacoeconomics in design rules, simulations and safety margins. Knowing the idea lets you read a specification sheet and understand why the numbers look the way they do.
In the classroom: Pharmacoeconomics is common in secondary-school and first-year university syllabi. It links to neighbouring topics Drug marketing and sales, Health economics, so understanding it makes those chapters shorter.
In everyday life: Look for Pharmacoeconomics outside the textbook — in sport, cooking, traffic, electronics or the sky above you. An example you found yourself is remembered far longer than one you were given.

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How to study Pharmacoeconomics in 20 minutes

Read the reference excerpt below once, without taking notes.
Close the page and write down what Pharmacoeconomics means in your own words.
Compare your version with the excerpt and mark what you missed.
Work through the three examples above with pen and paper.
Explain Pharmacoeconomics out loud to somebody else — or to Teacher Smith in the lgStudy chat.

Frequently asked questions

What is Pharmacoeconomics in simple terms?

Pharmacoeconomics refers to the scientific discipline that compares the value of one pharmaceutical drug or drug therapy to another. It is a sub-discipline of health economics.

Why does Pharmacoeconomics matter?

Because it connects several science ideas at once: it gives you a definition you can apply, a quantity you can calculate, and a way to check whether a result is plausible.

How should I study Pharmacoeconomics?

Read the excerpt, restate it from memory, then work through the examples and applications listed on this page. The five-step study plan above takes about twenty minutes.

What does this page cover?

It gives you a compact reference excerpt plus original lgStudy explanations, examples, applications and study material on Pharmacoeconomics.